Even a year after launch, the Nintendo Wii still remains a
hot item that rarely ever stays in retail stock –and comments from Nintendo of
America president Reggie Fils-Aime indicate that demand will once again
outstrip supply this holiday season.

“We have been sold out worldwide since we launched,” said
Fils-Aime to the Mercury
News. “Every time we put more into the marketplace, we sell more, which
says that we are not even close to understanding where the threshold is between
supply and demand.”

Fils-Aime adds that Nintendo is doing everything it can to
meet the demand for Wii, and that “The issue is not a lack of production.”

“The issue is we went in with a curve that was aggressive,
but the demand has been substantially more than that. And the ability to ramp
up production and to sustain it is not a switch that you flick on. We're
working very hard to make sure that consumers are satisfied this holiday, but I
can't guarantee that we're going to meet demand. As a matter of fact, I can
tell you on the record we won't,” said Fils-Aime.

In a previous story,
the Nintendo president said that holiday supplies of the Wii will be
“substantially more than the launch, substantially more than has been seen to
date ... given the level of demand and given the fact that the more we put in,
the more we sell, it is still going to be difficult to get your hands on the
Wii.”

Warehousing costs are also benificial when you don't meet demand. But I would say that he is right, once you increase production, it isn't easy to back it off later. Add an additional shift to the factory, and eventually you will need to stop that shift when demand dies off, and that is a bunch of severance pay for layed off workers. Not to mention the extra maintenance costs, and other operational costs from adding extra shifts. Nintendo probably didn't expect demand to be so high for so long to justify those additional costs.

FWIW, Nintendo was set to increase production back in June. It had the contractors lined up and the works. Then there was a big shortage of chips from Taiwan (that's affected a lot of companies) that delayed the plans.

Hmmm.I wonder why this manufacturing scale up/down appears to be a huge issue for many people. I'm working in an industry where resource demands can spike up and down in a week time.I have worked in other industries where it was slower but not being able to manage a production output issue for a year is unheard of unless there is a substantial issue with either the line itself or part supplies. Since Nintendo claims none of these two are a problem I'm puzzled.One year in the IT industry can represent the FULL life cycle of a product from launch to withdrawing from market.I still can't buy the "official" explanation. I believe it's a smoke to cover something up. I can't guess what it is.

I think we are a little confused. While the Wii, 360 and PS3 are "computers", they do not play in the IT industry. They are "Consumer Electronics." CE's which have a much longer life cycle than others. 5+ years as opposed to 6-12 months.

Now I don't know much about manufacturing but I don't believe that Nintendo is artificially keeping supply low to keep demand high. That is a risky game that I don't believe Nintendo willing to play right now.

I do believe however that they have not been releasing as much quantity into the market place as they could have because they have forecasted demand to be much higher this holiday season, and so they have held a little back to meet demand for that time, while still trying to satisfy current demand. In other words, they are playing it safe, which I believe is the right thing to do. I for one am going to get one for my family this holiday season if I can get my hand on one. If not, it might not be until September that I even consider getting one again.

And I believe this is where I believe Nintendo is planning on making its hay. Try to meet demand this holiday and if they can't, ramp production a little and release as much product as you can until you reach demand. That way they can increase production to meet demand without committing too many resources that they one day will not need.

Fortunetly these products are made in the Orient (if not Japan then China) where Unions aren't quite what they are here (if they exist)... I'm sure there is some sort of severance package, but I'm sure it doesn't compare to what a UAW work shift would get.

Of course they have severance packages. For example, if you leave quietly, we'll give you your last paycheck, and we won't convince the other factory in town (who is ran by this factory owner's brother-in-law) to fire your wife as well.